
Concept explainers
If the null hypothesis is rejected in Exercises 1 through 8, use the Scheffé test when the
a. State the hypotheses and identify the claim.
b. Find the critical value(s).
c. Compute the test value.
d. Make the decision.
e. Summarize the results.
Use the traditional method of hypothesis testing unless otherwise specified.
1. Lengths of Various Types of Bridges The data represent the lengths in feet of three types of bridges in the United States. At a = 0.01, test the claim that there is no significant difference in the means of the lengths of the types of bridges.
Simple truss | Segmented concrete | Continuous plate |
745 | 820 | 630 |
716 | 750 | 573 |
700 | 790 | 525 |
650 | 674 | 510 |
647 | 660 | 480 |
625 | 640 | 460 |
608 | 636 | 451 |
598 | 620 | 450 |
550 | 520 | 450 |
545 | 450 | 425 |
534 | 392 | 420 |
528 | 370 | 360 |
a.

To state: The hypothesis
To identify: The claim.
Answer to Problem 12.1.1RE
The hypothesis
The claim is that, all the means are same.
Explanation of Solution
Given info:
The data shows the lengths in feet of three types of bridges in the United States. The level of significance is 0.01.
Calculation:
The hypotheses are given below:
Null hypothesis:
Alternative hypothesis:
Here, all the means are same is tested. Hence, the claim is that, all the means are same.
b.

To find: The critical value.
Answer to Problem 12.1.1RE
The critical value is 5.285.
Explanation of Solution
Given info:
The level of significance is 0.01. The number of samples k is 3, the sample sizes
Calculation:
The degrees of freedom are
Where
Substitute 3 for k in
Substitute 36 for N and 3 for k in
Critical value:
The critical F-value is obtained using the Table H: The F-Distribution with the level of significance
Procedure:
- Locate 30 and 40 in the degrees of freedom, denominator row of the Table H.
- Obtain the value in the corresponding degrees of freedom, numerator column below 2.
That is,
That is, the critical value is 5.285.
Rejection region:
The null hypothesis would be rejected if
c.

To compute: The test value.
Answer to Problem 12.1.1RE
The test value is 6.94.
Explanation of Solution
Calculation:
Software procedure:
Step-by-step procedure to obtain the test statistic using the MINITAB software:
- Choose Stat > ANOVA > One-Way.
- In Response, enter the Temperatures.
- In Factor, enter the Factor.
- Click OK.
Output using the MINITAB software is given below:
From the MINITAB output, the test value F is 6.94.
d.

To make: The decision.
Answer to Problem 12.1.1RE
The null hypothesis is rejected.
Explanation of Solution
Conclusion:
From the result of part (c), the test value is 6.94.
Here, the F-statistic value is greater than the critical value.
That is,
Thus, it can be concluding that, the null hypothesis is rejected.
e.

To explain: The results.
Answer to Problem 12.1.1RE
The result concludes that, there is a significant difference between the means
Explanation of Solution
Calculation:
From the results, it can be observed that the null hypothesis is rejected. Thus, it can be concluding that there is evidence to reject the claim that all means are same.
Consider,
Step-by-step procedure to obtain the test mean and standard deviation using the MINITAB software:
- Choose Stat > Basic Statistics > Display Descriptive Statistics.
- In Variables enter the columns Florida, Pennsylvania and Maine.
- Choose option statistics, and select Mean, Variance and N total.
- Click OK.
Output using the MINITAB software is given below:
The sample sizes
The means are
The sample variances are
Here, the samples of sizes of three states are equal. So, the test used here is Tukey test.
Tukey test:
Critical value:
Here, k is 3 and degrees of freedom
Substitute 36 for N and 3 for k in v
The critical F-value is obtained using the Table N: Critical Values for the Tukey test with the level of significance
Procedure:
- Locate nearest value of 33 in the column of v of the Table H.
- Obtain the value in the corresponding row below 3.
That is, the critical value is 4.45.
Comparison of the means:
The formula for finding
That is,
Comparison between the means
The hypotheses are given below:
Null hypothesis:
Alternative hypothesis:
Rejection region:
The null hypothesis would be rejected if absolute value greater than the critical value.
Absolute value:
The formula for comparing the means
Substitute 620.5 and 610.2 for
Thus, the value of
Hence, the absolute value of
Conclusion:
The absolute value is 0.34.
Here, the absolute value is lesser than the critical value.
That is,
Thus, the null hypothesis is not rejected.
Hence, there is no significant difference between the means
Comparison between the means
The hypotheses are given below:
Null hypothesis:
Alternative hypothesis:
Rejection region:
The null hypothesis would be rejected if absolute value greater than the critical value.
Absolute value:
The formula for comparing the means
Substitute 620.5 and 477.8 for
Thus, the value of
Hence, the absolute value of
Conclusion:
The absolute value is 4.72.
Here, the absolute value is greater than the critical value.
That is,
Thus, the null hypothesis is rejected.
Hence, there is significant difference between the means
Comparison between the means
The hypotheses are given below:
Null hypothesis:
Alternative hypothesis:
Rejection region:
The null hypothesis would be rejected if absolute value greater than the critical value.
Absolute value:
The formula for comparing the means
Substitute 610.2 and 477.8 for
Thus, the value of
Hence, the absolute value of
Conclusion:
The absolute value is 4.38.
Here, the absolute value is lesser than the critical value.
That is,
Thus, the null hypothesis is not rejected.
Hence, there is no significant difference between the means
Want to see more full solutions like this?
Chapter 12 Solutions
ELEMENTARY STATISTICS W/CONNECT >IP<
- Problem 4. Margrabe formula and the Greeks (20 pts) In the homework, we determined the Margrabe formula for the price of an option allowing you to swap an x-stock for a y-stock at time T. For stocks with initial values xo, yo, common volatility σ and correlation p, the formula was given by Fo=yo (d+)-x0Þ(d_), where In (±² Ꭲ d+ õ√T and σ = σ√√√2(1 - p). дго (a) We want to determine a "Greek" for ỡ on the option: find a formula for θα (b) Is дго θα positive or negative? (c) We consider a situation in which the correlation p between the two stocks increases: what can you say about the price Fo? (d) Assume that yo< xo and p = 1. What is the price of the option?arrow_forwardWe consider a 4-dimensional stock price model given (under P) by dẴ₁ = µ· Xt dt + йt · ΣdŴt where (W) is an n-dimensional Brownian motion, π = (0.02, 0.01, -0.02, 0.05), 0.2 0 0 0 0.3 0.4 0 0 Σ= -0.1 -4a За 0 0.2 0.4 -0.1 0.2) and a E R. We assume that ☑0 = (1, 1, 1, 1) and that the interest rate on the market is r = 0.02. (a) Give a condition on a that would make stock #3 be the one with largest volatility. (b) Find the diversification coefficient for this portfolio as a function of a. (c) Determine the maximum diversification coefficient d that you could reach by varying the value of a? 2arrow_forwardQuestion 1. Your manager asks you to explain why the Black-Scholes model may be inappro- priate for pricing options in practice. Give one reason that would substantiate this claim? Question 2. We consider stock #1 and stock #2 in the model of Problem 2. Your manager asks you to pick only one of them to invest in based on the model provided. Which one do you choose and why ? Question 3. Let (St) to be an asset modeled by the Black-Scholes SDE. Let Ft be the price at time t of a European put with maturity T and strike price K. Then, the discounted option price process (ert Ft) t20 is a martingale. True or False? (Explain your answer.) Question 4. You are considering pricing an American put option using a Black-Scholes model for the underlying stock. An explicit formula for the price doesn't exist. In just a few words (no more than 2 sentences), explain how you would proceed to price it. Question 5. We model a short rate with a Ho-Lee model drt = ln(1+t) dt +2dWt. Then the interest rate…arrow_forward
- In this problem, we consider a Brownian motion (W+) t≥0. We consider a stock model (St)t>0 given (under the measure P) by d.St 0.03 St dt + 0.2 St dwt, with So 2. We assume that the interest rate is r = 0.06. The purpose of this problem is to price an option on this stock (which we name cubic put). This option is European-type, with maturity 3 months (i.e. T = 0.25 years), and payoff given by F = (8-5)+ (a) Write the Stochastic Differential Equation satisfied by (St) under the risk-neutral measure Q. (You don't need to prove it, simply give the answer.) (b) Give the price of a regular European put on (St) with maturity 3 months and strike K = 2. (c) Let X = S. Find the Stochastic Differential Equation satisfied by the process (Xt) under the measure Q. (d) Find an explicit expression for X₁ = S3 under measure Q. (e) Using the results above, find the price of the cubic put option mentioned above. (f) Is the price in (e) the same as in question (b)? (Explain why.)arrow_forwardThe managing director of a consulting group has the accompanying monthly data on total overhead costs and professional labor hours to bill to clients. Complete parts a through c. Question content area bottom Part 1 a. Develop a simple linear regression model between billable hours and overhead costs. Overhead Costsequals=212495.2212495.2plus+left parenthesis 42.4857 right parenthesis42.485742.4857times×Billable Hours (Round the constant to one decimal place as needed. Round the coefficient to four decimal places as needed. Do not include the $ symbol in your answers.) Part 2 b. Interpret the coefficients of your regression model. Specifically, what does the fixed component of the model mean to the consulting firm? Interpret the fixed term, b 0b0, if appropriate. Choose the correct answer below. A. The value of b 0b0 is the predicted billable hours for an overhead cost of 0 dollars. B. It is not appropriate to interpret b 0b0, because its value…arrow_forwardUsing the accompanying Home Market Value data and associated regression line, Market ValueMarket Valueequals=$28,416+$37.066×Square Feet, compute the errors associated with each observation using the formula e Subscript ieiequals=Upper Y Subscript iYiminus−ModifyingAbove Upper Y with caret Subscript iYi and construct a frequency distribution and histogram. LOADING... Click the icon to view the Home Market Value data. Question content area bottom Part 1 Construct a frequency distribution of the errors, e Subscript iei. (Type whole numbers.) Error Frequency minus−15 comma 00015,000less than< e Subscript iei less than or equals≤minus−10 comma 00010,000 0 minus−10 comma 00010,000less than< e Subscript iei less than or equals≤minus−50005000 5 minus−50005000less than< e Subscript iei less than or equals≤0 21 0less than< e Subscript iei less than or equals≤50005000 9…arrow_forward
- The managing director of a consulting group has the accompanying monthly data on total overhead costs and professional labor hours to bill to clients. Complete parts a through c Overhead Costs Billable Hours345000 3000385000 4000410000 5000462000 6000530000 7000545000 8000arrow_forwardUsing the accompanying Home Market Value data and associated regression line, Market ValueMarket Valueequals=$28,416plus+$37.066×Square Feet, compute the errors associated with each observation using the formula e Subscript ieiequals=Upper Y Subscript iYiminus−ModifyingAbove Upper Y with caret Subscript iYi and construct a frequency distribution and histogram. Square Feet Market Value1813 911001916 1043001842 934001814 909001836 1020002030 1085001731 877001852 960001793 893001665 884001852 1009001619 967001690 876002370 1139002373 1131001666 875002122 1161001619 946001729 863001667 871001522 833001484 798001589 814001600 871001484 825001483 787001522 877001703 942001485 820001468 881001519 882001518 885001483 765001522 844001668 909001587 810001782 912001483 812001519 1007001522 872001684 966001581 86200arrow_forwarda. Find the value of A.b. Find pX(x) and py(y).c. Find pX|y(x|y) and py|X(y|x)d. Are x and y independent? Why or why not?arrow_forward
- The PDF of an amplitude X of a Gaussian signal x(t) is given by:arrow_forwardThe PDF of a random variable X is given by the equation in the picture.arrow_forwardFor a binary asymmetric channel with Py|X(0|1) = 0.1 and Py|X(1|0) = 0.2; PX(0) = 0.4 isthe probability of a bit of “0” being transmitted. X is the transmitted digit, and Y is the received digit.a. Find the values of Py(0) and Py(1).b. What is the probability that only 0s will be received for a sequence of 10 digits transmitted?c. What is the probability that 8 1s and 2 0s will be received for the same sequence of 10 digits?d. What is the probability that at least 5 0s will be received for the same sequence of 10 digits?arrow_forward
- Glencoe Algebra 1, Student Edition, 9780079039897...AlgebraISBN:9780079039897Author:CarterPublisher:McGraw HillCollege Algebra (MindTap Course List)AlgebraISBN:9781305652231Author:R. David Gustafson, Jeff HughesPublisher:Cengage Learning


